The Swiss Franc is under pressure due to worries about the Swiss economy. SECO has kept its growth forecast for 2025 at 1.3% but lowered the 2026 forecast to 0.9%. This uncertainty has led to the USD/CHF declining to about 0.7910, a decrease of 0.30% for the day. The State Secretariat for Economic Affairs announced that Switzerland’s GDP is expected to grow by 1.3% this year, which is below the usual average. A slowdown is likely in the second half of 2025, which may hurt investor confidence. This report is released just before Switzerland shares its trade balance data.

Dollar Faces Pressure

In the US, the Dollar is facing challenges due to a potential government shutdown and expectations of Federal Reserve interest rate cuts. The deadlock in Washington is affecting growth projections, with almost a 100% chance of a rate cut at upcoming meetings. Some Federal Reserve officials have suggested that more cuts might occur if job market risks increase. There are signs of easing trade tensions between the US and China, which may help limit USD losses. President Trump hinted at possible tariff reductions, improving risk appetite slightly. This could lower demand for the Swiss Franc as a safe-haven currency. The attached table shows the USD’s percentage changes against major world currencies, particularly highlighting its strength against the Canadian Dollar. The current situation features a weak US Dollar versus a Swiss Franc struggling with a poor economic outlook. Right now, the pressure from the US government shutdown and expected Federal Reserve rate cuts is the main concern. This may lead to USD/CHF dropping further, possibly reaching the 0.7850 level.

Strategy And Market Outlook

History shows that prolonged government shutdowns, like the one in late 2018, can create uncertainty and negatively affect the dollar. With markets anticipating a near-certain Fed rate cut this month and another in December, the easiest path for the dollar appears to be down. Further delays in resolving the budget stalemate will likely strengthen this negative outlook. However, we need to be careful, as the Swiss Franc’s strength lacks strong support. Switzerland’s growth forecast is lowered to just 0.9% for 2026, and Tuesday’s trade balance data may show this slowdown. The Swiss National Bank often steps in to weaken the Franc when it threatens exports, a risk that increases with every rise in the Franc’s value. Considering these conflicting factors, buying put options on USD/CHF is a smart strategy for the coming weeks. This allows us to benefit from potential declines in the USD while limiting our risk if a sudden event, like a US budget resolution or action from the Swiss National Bank, causes a sharp turn. A bear put spread can also help lower the initial cost of betting on a continuing fall. We should keep a close watch on Washington for any signs of progress in resolving the funding crisis, as this is the most immediate trigger for a dollar rally. We will also pay attention to the upcoming meeting between US Treasury Secretary Bessent and Chinese Vice Premier He Lifeng. Any positive trade developments from that meeting could quickly lessen the Franc’s appeal as a safe-haven asset. Create your live VT Markets account and start trading now.

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